Bill targeting underground economy clears California Assembly

A bill aimed at consolidating efforts by state agencies to recover nearly $8.5 billion in lost state taxes involving the underground economy passed the California Assembly May 30 by a vote of 75 to three. Second District Assemblyman Wesley Chesbro voted to support his bill. The bill now moves to the California Senate for consideration.

Assembly Bill 576 will create a pilot Revenue Recovery and Collaborative Enforcement Team to promote data sharing and communications between various state agencies to prosecute "criminals who underpay or do not pay state sales, use and income taxes," according to a press release by State Board of Equalization Chairman Jerome Horton.

"This bipartisan support for legitimate businesses that are put at a disadvantage by criminal activity in California's underground economy is truly heartening," said Horton. "This vote shows our legislature's commitment to stop these tax dodgers who don't pay their fair share."

"To effectively pursue criminal tax evasion, state agencies must be able to share data and intelligence. The solution is AB 576," said Assemblyman V. Manuel P?rez as he presented his bill on the Assembly floor. "At a time when California has been reducing and in some cases eliminating funding for vital public services, it is estimated the state loses up to $8 billion a year in tax revenue due to the effects of the state's prolific underground economy, currently valued at between $60 and $140 billion. While the impact of the underground economy on the state is extensive, the state lacks a coordinated effort among its various agencies to tackle the underground economy

"AB 576 will address the problem by establishing a California Intelligence Partnership between nine state agencies to enable the sharing of information and investigate leads," says P?rez.

In 2012, the Mendocino County underground economy in 2010 was estimated at $675 million based on methodology suggested by Humboldt County banker Jennifer Budwig. She estimated marijuana income contributed about $415 million to the Humboldt County underground economy.

These figures are considered to understate the scope of the full underground economy as it only includes the marijuana and other underground money actually spent in Mendocino and Humboldt counties. It does not reflect the quantity of money generated by transient growers or cartels believed to spend little money locally.